Monthly Rising Coin Report – Arbitrum


Arbitrum Overview – The Facts

What is Arbitrum – The Newbie’s Summary

Arbitrum is an Ethereum based technology that makes transactions faster, more scalable and more private. It works by creating a new layer on top of Ethereum, which helps take some of the strain off of Ethereum’s main network. This means that developers can build new applications that work on this new layer, without having to worry about Ethereum’s main network slowing down. By offloading work from the main network, Arbitrum makes the process faster and cheaper. The New York City based company Offchain Labs is working on building this new technology with the aim to making cryptocurrencies more powerful.

How does Arbitrum Work – The Nerd’s Perspective

Arbitrum is an optimistic rollup technology that enables Ethereum smart contracts to scale. This technology passes messages between smart contracts on the Ethereum main chain and those on the Arbitrum second layer chain. Most of the transaction processing happens on the second layer, and the results are recorded on the main chain, significantly increasing speed and efficiency. The term “optimistic” refers to the fact that any validator can post a rollup block and confirm the validity of other blocks. Meanwhile, the term “rollup” refers to how public information can be used to rebuild a complete history of the chain from an optimized log of events.

The Arbitrum protocol guarantees that code will run correctly as long as one validator is honest, helping the network resist collusion and other forms of attack. Nodes can choose to participate in the Arbitrum chain, and validator nodes observe the state of the chain, while full nodes aggregate layer 1 transactions. Aggregators that submit transactions to the layer 1 chain earn rewards paid in ETH, while other network participants, such as validators, receive transaction fees.

Arbitrum incorporates a challenge step for rollup blocks, allowing other validators to check the correctness of a block and issue a challenge if they believe it is incorrect. If the block is proven to be wrong, the lying validator’s stake will be confiscated, ensuring that validators always play fair.

The platform includes its own virtual machine, the Arbitrum Virtual Machine (AVM), which is the execution environment for Arbitrum smart contracts and operates above the EthBridge – the set of smart contracts that interacts with the Arbitrum chain. Ethereum-compatible smart contracts are automatically translated to run on the AVM.

What makes Arbitrum Unique – For the Special One

Arbitrum distinguishes itself among other scaling solutions for Ethereum through its use of optimistic rollups. It offers several advantages over other optimistic rollup solutions, including:

  • Compatibility: Arbitrum allows existing Ethereum DApps to run on its platform without requiring any code modifications. It supports unmodified EVM contracts and transactions.
  • Scalability: Arbitrum can handle a high volume of transactions per second with low fees and fast finality, while still maintaining the security standards of Ethereum
  • Flexibility: Developers using Arbitrum have the flexibility to deploy programs written in popular programming languages like Rust, C++, and more through its upcoming EVM+ equivalence feature called Stylus.
  • Decentralization: Arbitrum’s transaction ordering does not rely on a centralized operator or sequencer. Instead, it employs a decentralized network of validators who stake ARB tokens and earn fees for securing the network.
  • Ecosystem: Arbitrum has a thriving ecosystem comprising DApps, wallets, tools, and partners, positioning it as one of the leading scaling solutions for Ethereum. Some notable protocols available on the Arbitrum network include GMX, Treasure, Camelot, Radiant Capital, Vela Exchange and more.

The growth of Arbitrum can be gauged through its total value locked (TVL) metric, which peaked at $3.7 billion in the beginning of May. As of the time of writing, its TVL stands at around $3.2 billion, making it the highest TVL among all Layer 2 ecosystems.

How has Arbitrum Developed – For the Visually Attracted

What’s in it for me – For You (Maybe)

If you are a developer and thinking about building your next decentralized app on the Ethereum network, you might want to try the Arbitrum ecosystem. With the combination of low feeds, high speed and privacy preserving features, it seems to gain traction over its layer-2 competitors like Polygon or Optimism. Most importantly, if you are familiar with or have already been building apps or creating smart contracts on the Ethereum chain, everything will work just as smoothly on Arbitrum.

Disclaimer: “This report is for information and knowledge transfer purposes only and is not an investment recommendation.”


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Hans Christian Schmitz

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Jens Keller